2007 has been an indifferent year for the UK protection industry. To a some extent the malaise has been the cause and effect of the price war, but the influences of ‘higher beings’ have also played a part.

To start with, HMRC pulled the rug from under the feet of pension term assurance. Sadly, the many millions of pounds spent by insurers developing propositions was ultimately wasted money. If only that money been spent on reinventing income protection insurance!

As the protection industry adopted the ABI’s statement of best practice for critical illness insurance the Financial Ombudsman Service chose to have a pop at the industry. In an interview broadcast on BBC Watchdog on 11th April, Chief Ombudsman, Walter Merricks, said, “On the figures we’ve got it appears that one in five of the people who’ve got CI insurance policies may have policies that are actually invalid.” I’m not sure what figures he’s got but he could be correct if people claim for things that aren’t covered or failed in their duty of disclosure. Perhaps the FOS believes that the best way to avoid complaints is to create an environment where people don’t buy products in the first place!

The lessons to be learned from 2007 are that the industry is on its own and cannot expect to benefit from any positive help from the Government or the regulators and that continually dropping prices doesn’t stimulate demand.

So what do I hope for in 2008?

1. The price war will end and insurers will realise that cutting premiums is a short term strategy that merely improves market share and appeases shareholders.

2. We continue to see growth in the use of tele-underwriting, tele-interviewing and on-line underwriting systems to help make protection a more efficient transaction.

3. New products and providers enter the market and challenge the status quo, giving the industry a much needed kick up the backside.

 4. The industry realises that there is more to protection advice than sticking some client details into a quote portal and recommending the cheapest product. Customers need advice not just price. If they want the cheapest available offer the web aggregators can tell them that.

5.   Above everything I hope that 2008 is the year when we stop the incessant talking and navel gazing about what’s right and wrong with income protection insurance and see real innovation that turns this ailing proposition into something that appeals to the consumer, is cost-effective for advisers to sell and is profitable for insurers.

Happy Christmas and a Happy New Year